Skellerup lifts 1H profit 14% as restructuring benefits show, hikes annual forecast

Skellerup Holdings [NZX: SKL], the industrial rubber goods maker, lifted first-half earnings by 14 percent as it reaped the benefits of restructuring measures. The company hiked its expectations for annual profit and the shares gained.

Net profit rose to $10.8 million, or 5.61 cents per share, in the six months ended Dec. 31, from $9.5 million, or 4.92 cents, a year earlier, the Auckland-based company said in a statement. That outpaced the 2.4 percent lift in revenue to $97.3 million.

Skellerup raised its expectations for annual profit to between $22 million and $24 million from a previous range of between $21 million and $23 million. That compares to annual profit of $19 million in the 2013 year.

"As a company we consider we are relatively well positioned in markets that we operate," chief executive David Mair said. "We will continue, however, to look for efficiencies as well as new opportunities to grow through being close to our customers and understanding their needs."

The board declared an interim dividend of 3.5 cents per share, payable on March 27 with a record date of March 14.

The stock climbed 5.9 percent to $1.81, paring a 1.2 percent decline this year.

Skellerup had previously based its higher earnings expectations on a bigger contribution from its industrial unit, which makes rubber products for sectors ranging from automotive through to distributer and end-user customers. The segment dragged on the 2013 earnings due to a slowdown in demand, and prompted Skellerup to refine and develop new products and relocate its manufacturing operations closer to its customers.

Those improvements have started to show in the first-half result, with the industrial division lifted earnings before interest and tax 18 percent to $9.16 million, even as sales edged up 0.5 percent to $59.6 million.

The agri division increased sales 5.9 percent to $37.6 million, and earnings gained 7.7 percent to $8.9 million. That was on the strength of the local dairy sector and increasing farm conversions, which underpinned demand for rubber liners and tubing, Skellerup said.

Operating cash flow slipped to $13 million in the half from $14.6 million a year earlier, leaving Skellerup with cash and equivalents of $8.9 million as at Dec. 31. Net debt shrank to $3.4 million at the end of the period from $4.5 million a year earlier.

(BusinessDesk)